US sanctions and a blockade of Iranian oil exports are deepening the economic crisis in Iran, as crude prices surged towards $100 per barrel amid renewed tensions in the Middle East.
Brent crude, the international benchmark, climbed to $97 per barrel on Thursday before retreating to $95.50, according to Oilprice.com, as the disruption to Iranian oil supplies heightened concerns about global crude availability.
According to Reuters, the surge in oil prices came as Washington intensified its campaign to cut off Iran’s access to international financing and prevent the country from circumventing sanctions.
Three senior Iranian sources reportedly told Reuters that the latest measures were proving increasingly difficult for Tehran to withstand, with the country facing dwindling channels for securing foreign currency and importing essential goods.
The pressure has also severely affected Iran’s oil exports. Iranian crude loadings have fallen to about 260,000 barrels per day this month, from around 1.7 million bpd a year earlier, according to commodity analytics firm Kpler.
The development has raised fresh concerns over the impact of the sanctions on global oil markets, particularly as the conflict has disrupted energy supplies and shipping through the Strait of Hormuz.
While some energy continues to flow through the strategic waterway, the US blockade of Iranian oil exports has effectively cut off Tehran’s main source of revenue, Reuters reported.
Iran’s economic problems have been compounded by a sharp collapse in its currency and accelerating inflation. The rial has fallen from about one million rials to the dollar a year ago to more than 2.2 million rials currently.
Official figures put Iran’s 12-month average inflation at 69.9 per cent, while prices of food, beverages and tobacco have risen at nearly twice that rate.
The squeeze has also affected Iran’s ability to maintain its sanctions-evasion networks, with front companies, unregistered tankers and smuggling operations becoming increasingly expensive.
The country’s trade has fallen by between 25 and 35 per cent, with imports hit harder than exports, Iranian President Masoud Pezeshkian said.
The United Arab Emirates has also disrupted a major channel for Iranian commerce, announcing on 19 August that all commercial exchange and financial dealings with Tehran had been halted until further notice.
Meanwhile, Iran’s domestic fuel situation is becoming increasingly precarious.
One senior Iranian source told Reuters that the country has only about two months’ supply of petrol, which it needs to import despite its domestic oil production because of limited refining capacity.
The deteriorating economic conditions are also placing severe pressure on Iranian households. Average monthly salaries are estimated at about $125, compared with basic household spending requirements of roughly $450, according to official data.
The economic squeeze comes as fighting between Iran and the United States has intensified, with attacks and retaliatory strikes raising fears of further disruption to oil supplies and shipping.